NI v NSW Trustee and Guardian [2009] NSWADT 179 (8 July 2009)

Last Updated: 28 July 2009

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL

CITATION:
NI v NSW Trustee and Guardian [2009] NSWADT 179


DIVISION:
GENERAL DIVISION

PARTIES:
APPLICANT
NI

RESPONDENT
NSW Trustee and Guardian



FILE NUMBERS:
093118

HEARING DATES:
12 May 2009, 21 May 2009, 3 June 2009, 15 June 2009, 1 July 2009

SUBMISSIONS CLOSED:
1 July 2009



DATE OF DECISION:
8 July 2009

BEFORE:
O'Connor K - DCJ (President)





LEGISLATION CITED:
Administrative Decisions Tribunal Act 1997
NSW Trustee and Guardian Act 2009
Protected Estates Act 1983

CASES CITED:
KV v Protective Commissioner [2004] NSWADTAP 29
Protective Commissioner v D [2004] NSWCA 216; (2004) 60 NSWLR 513

TEXTS CITED:


APPLICATION:
Protected Person – Decision by Trustee to sell major asset – Stay sought – Alternative Options – Best Interests – Stay refused

MATTER FOR DECISION:



REPRESENTATION:
In person
T Tunbridge, solicitor

PUBLICATION RESTRICTION:


ORDERS:
1. Application for stay of decision of Trustee refused. Interim stay order vacated.
2. Registrar to list the application for review for directions.


Reasons for Decision:

REASONS FOR DECISION

1 A member of the family of a protected person (the applicant) has applied to the Tribunal for review of a decision by the Protective Commissioner to sell the protected person’s main capital asset in order to generate sufficient funds to provide for his care and other financial needs. The decision was made by the Protective Commissioner in February 2009, and confirmed following internal review in March 2009.

2 The protected person is Mr A, aged 81 years. Mr A became a permanent resident in an aged care facility at Croydon in April 2007. He is suffering from dementia, and there are no prospects of improvement in his condition. His estimated life expectancy is about 8 years.

3 This judgment deals with an interlocutory application to have the Protective Commissioner’s decision to sell stayed pending the hearing of the review application.

4 When applications mentioned were filed (7 May 2009), the Tribunal’s jurisdiction was conferred by the Protected Estates Act 1983, s 28A. That Act (the former Act) has been repealed with effect from 1 July 2009. It has been replaced by the NSW Trustee and Guardian Act 2009, No 49 (the TG Act). The office of Protective Commissioner is abolished, and replaced by the office of NSW Trustee and Guardian, also referred to in the Act as ‘NSW Trustee’.

5 The Tribunal’s jurisdiction in matters of the present kind is preserved, and is now found in s 70 of the TG Act. The savings and transitional provisions provide that anything done prior to the commencement of the TG Act under a corresponding provision of the former Act is taken to be done under the new Act and similarly anything done by the Protective Commissioner is taken to have been done by the NSW Trustee (Sched 1, cll 4 and 5). In the reasons which follow, I will use the term ‘Trustee’, compendiously, to refer to both the old and new office.

6 The Guardianship Tribunal appointed the Trustee as Mr A’s financial manager on 17 February 2006. The asset which the Trustee has decided to sell is Mr A’s interest in land at Glebe which he co-owns with Mr G. The land is occupied by a block of 15 flats. The building is an older style one dating from about the 1930s. Mr G has been a long-time business partner of Mr A. He and Mr A have co-owned the block for about 40 years. Mr G is willing to buy out Mr A’s interest for $2.0m.

7 The Trustee saw the decision as necessary to ensure that there was a sufficient liquid fund to provide for Mr A’s health care and other financial needs for the remainder of his life.

8 The applicant is Mr A’s daughter. She is supported in her application by two siblings (another daughter and a son), and their spouses. The Trustee opposes the grant of a stay pending full hearing. The situation, in the opinion of the Trustee, is a pressing one, as the liquid fund available for Mr A’s financial needs has declined to a few thousand dollars, in circumstances where the average expenditure on his needs has been of the order of $10,000 a month.

9 Section 39 of the TG Act provides that it is the duty of everyone exercising functions under Chapter 4 of the Act (Management functions relating to persons incapable of managing their own affairs) with respect to protected persons or patients to observe the following principles:

‘(a) the welfare and interests of such persons should be given paramount consideration,

(b) the freedom of decision and freedom of action of such persons should be restricted as little as possible,

(c) such persons should be encouraged, as far as possible, to live a normal life in the community,

(d) the views of such persons in relation to the exercise of those functions should be taken into consideration,

(e) the importance of preserving the family relationships and the cultural and linguistic environments of such persons should be recognised,

(f) such persons should be encouraged, as far as possible, to be self-reliant in matters relating to their personal, domestic and financial affairs,

(g) such persons should be protected from neglect, abuse and exploitation.’

10 In Protective Commissioner v D [2004] NSWCA 216; (2004) 60 NSWLR 513, the Court of Appeal emphasised the protective function of the Protective Commissioner in the context of determining whether s 28 of the former Act permitted the Protective Commissioner to make payment for past gratuitous care out of the estate of a protected person. McColl JA (Mason P and Giles JA agreeing) described the role of the Protective Commissioner in the following terms (at 544-545):

‘...The manager stands in the shoes of a person who is unable to manage his/her affairs by virtue of circumstances beyond his/her control. The manager exercises a protective and benevolent function, protective in the sense that the manager’s task is to ensure the estate is managed in a manner to secure the protected person’s estate for that person’s continued maintenance. In this respect the Protected Estates Act and its predecessors reflected the "parental and protective" jurisdiction historically exercised by the Crown both in the exercise of its prerogative and pursuant to the Prerogative Statutes.’

11 The interests of the protected person must be given paramount consideration, although the interests of the family members are also relevant (KV v Protective Commissioner [2004] NSWADTAP 29).

12 Section 60 of the Administrative Decisions Tribunal Act 1997 (the ADT Act) gives the Tribunal power to stay a reviewable decision under review. It provides:

‘(1) Subject to this section, an application to the Tribunal for a review of a reviewable decision does not affect the operation of the decision under review or prevent the taking of action to implement that decision.

(2) On the application of any party to proceedings for an application for a review of a reviewable decision, the Tribunal may make such orders staying or otherwise affecting the operation of the decision under review as it considers appropriate to secure the effectiveness of the determination of the application.

(3) The Tribunal may make an order under this section only if it considers that it is desirable to do so after taking into account:

(a) the interests of any persons who may be affected by the determination of the application, and

(b) any submission made by or on behalf of the administrator who made the decision to which the application relates, and

(c) the public interest.

(4) While an order is in force under this section (including an order that has previously been varied on one or more occasions under this subsection), the Tribunal may, on application by a party to the proceedings, vary or revoke the order by another order.’

13 In KV v Protective Commissioner, Hennessy DP referred to section 60 and said that:

‘7 Despite the fact that s 60 relates to the review of a reviewable decision, the principles in that provision, together with the common law principles in relation to grounds for granting a stay, provide useful guidance to the approach we should take in this matter. At common law the Tribunal must consider the balance of convenience and the competing rights of the parties. Section 60 provides that the Tribunal should only stay the decision if it considers it appropriate to "secure the effectiveness of the determination of the application." That phrase has been interpreted ... to mean, basically, that a stay would not be granted unless there was some kind of irreparable loss or harm that would be caused in the interim, that could not be rectified by the Tribunal, or in this case, the Appeal Panel through a final determination. If we are satisfied that a stay is necessary to secure the effectiveness of the determination, we would then go on to determine whether a stay was in the interests of any person whose interests might be affected by the determination, any submissions made by the parties and the public interest, if any.’

14 The pre-condition set out in sub-section (2) is met in this case. The sale of the Glebe property would be an irreversible decision on the part of the Trustee. It is apparent that a stay would be necessary to secure the effectiveness of any ultimate determination, were it to favour the applicant.

15 At the time the decision was made, the Trustee was exercising the power conferred by s 24 of the former Act. The corresponding provision is now found at s 16(1)(g) of the TG Act. Under the former Act, the persons who could make a review application were divided into the protected person, the spouse of the protected person or ‘any other person whose interests are, in the opinion of the ADT, adversely affected by the decision’: s 28A. Now the standing test is a simplified one – relevantly, an application can be made by any person ‘who, in the opinion of the ADT, has a genuine interest in the matter to which the Trustee’s decision relates’. In this instance, the Tribunal considers that the applicant satisfies the test under the former Act and the one now applicable under the TG Act.

16 On 12 May 2009 the Tribunal commenced to hear the stay application. It adjourned the application, and made an interim stay order pending disposal of the stay application. That interim stay order has been continued pending this decision.

Background

17 The Trustee first made a decision to sell Mr A’s interest in the Glebe property on 20 February 2007. The co-owner, Mr G, opposed the sale. Two courses were left open to the Trustee, either to apply to the Supreme Court for partition and sale or to continue negotiations with Mr G, and sell in co-operation with him. The Trustee pursued the latter course, and by 2008 a sale strategy was agreed. A potential buyer, a developer, was found at $4.8m. An option fee was paid, the option-holder took up the option, contracts were exchanged but the purchaser failed to complete.

18 When the sale fell through (December 2008), the Trustee reopened discussions with Mr G. This time Mr G agreed to buy out Mr A’s share for $2.0m. On 10 February 2009 the decision was notified to Mr A’s wife, Mrs A. Mrs A is Mr A’s second wife. Mr A’s first wife died about 12 years ago, and he remarried a few years later. The applicant and her siblings are children of the first marriage.

19 On 19 February 2009, Mrs A requested a review of the decision. The Trustee reaffirmed its decision on 10 March 2009.

20 The applicant and the family members supporting her in these proceedings said that they only found out about the proposal to sell to Mr G in mid-April. The file records show that various family members communicated their displeasure with the decision to the Trustee in and around 22 to 27 April 2009. They lodged their application for review with the Tribunal on 7 May 2009. No objection based on time has been taken to the Tribunal accepting the application.

21 The applicant and the other family members have stated that their principal concern is to see that the best price is obtained for their father’s assets if they must be sold for his care needs. The family was agreeable to the course the Trustee had pursued without success in 2008. Had that sale proceeded, the present issue would have been resolved, with the Trustee having a fund of about $2.4m with which to meet Mr A’s financial needs. They do not think that the sale of the Glebe property in the present market conditions is desirable because of the downturn in the economy attributed to the global financial crisis, as it is called. The family would now like to see the Glebe property retained at least for a few years until the market improves. They indicated at the hearing on 12 May that they wished to see an alternative option pursued.

22 The Tribunal noted at that hearing the smallness of the fund available to the Trustee for their father’s needs, of the order of $8,000 at that point. It suggested that the family give consideration to joining together and raising say $300,000, and putting that amount (by way of a loan) under the control of the Trustee with a view to that fund covering Mr A’s care needs and other expenses for say 2 to 3 years. That would enable the sale of the Glebe property to be put off.

23 On return to the Tribunal on 21 May 2009 the family members stated that they would prefer not to supply funds, and expressed concerns over the way the Trustee was administering the estate. The Trustee advised that the family had applied to the Guardianship Tribunal to revoke the Trustee’s appointment and appoint a family member as financial manager. (As at 15 June 2009, these proceedings had, according to the Trustee, been stood over generally.)

24 The family then raised the possibility that the matrimonial home at Drummoyne be sold and Mrs A relocated to a smaller dwelling. The family members said that Mrs A was agreeable to that course. It was said that such a course would free up funds of the order of $300,000. This option had not been actively considered by the Trustee. Understandably, the Trustee ordinarily looks to the disposal of investment assets before considering the disposal of the matrimonial home. The Trustee proceeds on the reasonable assumption in cases where the protected person is unable to express his or her wishes that that person would want his or her spouse and family to be accommodated in the same way as when they were together.

25 The Tribunal continued the interim stay order until Mrs A was in a position to attend to give evidence. She was on holiday in Greece during May. Soon after her return, the Tribunal reconvened (on 15 June 2009) to consider what her wishes were. She informed the Tribunal that she was desirous of being relocated to a smaller, more manageable home. She stated that she would be happy to move to a suitable two-bedroom town house or villa unit in the Croydon/Five Dock area. The matrimonial home is subject to a mortgage of $100,000.

Material before Tribunal

26 In light of this development and other contentions made by the family, the Tribunal gave directions for additional material to be filed with a view to a final decision being made in relation to continuation of the stay at a hearing on 1 July 2009. At the various hearings, including on 1 July 2009, the Tribunal has had placed before it the following documents of importance:

From the Trustee: Internal Review Decision responding to Mrs A’s request, dated 10 March 2009; file memos 27 April 2009 referring to concerns raised by family members; assets and liabilities statement as at 2007, plus a file note dated 31 October 2008 (all filed 12 May 2009); Full File Material as required by s 58 of the ADT Act; Valuation Report dated 4 November 2008 for the Glebe Property from MVS Valuations ($3.9m); Ledger Records for the Estate Account covering the period 9 June 2007 to 13 June 2008 (all filed 21 May 2009); Building Report on Glebe Property relating to Maintenance Needs from DibCon dated 29 May 2009 (filed 3 June 2009); Valuation Report dated 17 June 2009 for the Drummoyne Property from MVS Valuations ($900,000); Affidavit from Damian Warren, Estate Officer, and Property Inspection Report for Glebe from Archicentre, inspection 19 June 2009; and further Affidavit from Mr Warren and Statement of Current Account plus Extract relating to Recent Sale Price of a 3-bedroom Town House in Five Dock (all filed 1 July 2009).

From the Applicant: Valuation Report, 25 June 2009, from Christopher Manomaski, Registered Valuer, for Drummoyne ($1.05m); Extracts relating to Recent Sale Prices of 2-bedroom Town Houses in Croydon Park (4), Wareemba (1), Concord West (1), Strathfield (1), Five Dock (1); Valuation Report, 28 June 2009, from Christopher Manomaski, Registered Valuer, for Glebe ($3.9m); and written submissions from a daughter.

Mr A’s Financial Needs

27 Mr A is a non-concessional resident, and the care fees due to the aged care facility are $117.36 per day, i.e. $42,836 per annum. In addition the Trustee has been making payments in relation to items of a personal nature, an allowance for Mrs A, and paying rates and other outgoings relating to the upkeep of the matrimonial home in Drummoyne, where Mrs A is now the sole resident.

28 In the period 17 February 2008 to 16 February 2009 (one year) the amount shown expended on Mr A’s behalf was $154,072.70. The relevant document filed by the Trustee (Ex 1, item 2.7 filed 21 May 2009) fails to categorise the purposes of the expenditure clearly. On the health care side, the primary expense is $41,438.12 for accommodation and care at the aged care facility. Provision is made for financial support for Mrs A and associated household expenses. In the year mentioned, the amount of the personal allowance was $20,800 ($400 per week) intended to cover food, medical and transport required by Mrs A. Another item of significance was the estate management fee of the Trustee ($24,179.18). These items total approximately $93,000. The main component of the remaining items was land tax ($12,323.65), ‘personal debt payment’ understood to be the mortgage payments due on Drummoyne (there is a $100,000 mortgage) ($10,544.50).

29 There is also an amount shown under the abbreviation ‘Client Reg Allow’ of $29,435. The Tribunal has been informed by the OPC that this amount refers to an internal transfer of funds from one Office Trust Account to another and is cancelled out by the item referred to as "Transfer Funds" in the same document under the heading "INCOME".

30 In the Tribunal’s view this is an unhelpful way to present the accounts. The accounts should be presented in a form that clearly demonstrates the actual level of expenditure on the financial needs of the protected person; or, at the least, book transfers should be the subject of a special notation. Setting this amount to one side, therefore, the true level of expenditure for the year under notice was of the order of $125,000.

31 The summary information does not refer to the costs associated with the property at Glebe. The Tribunal’s understanding is that the income shown for Glebe for the period is a net figure after deduction by the agent of outgoings – income $60,370.35. The Tribunal accepts the family’s submissions that the net income for the period under notice (February 2008 to February 2009) was diminished by unusual periods of vacancy of the flats pending an expected sale to the developer.

32 The flats are relatively basic in their fit-out, but are in a prime rental environment, nearby Sydney University and just outside the CBD.

33 At present the flats are earning, gross, $239,000 in rental income (with one flat vacant, which when let, would add a further $5,000). Mr A is entitled to a half share of the income. Accordingly, the gross half share to which Mr A’s estate is entitled is $119,500 as at today. This amount is subject to usual deductions such as agent’s commission, outgoings borne by the owner, and maintenance items. According to the Archicentre report (19 June 2009) substantial repairs need to be undertaken immediately which, if proceeded with, would considerably deplete that amount of net income.

34 In summary, the material indicates that an amount of the order of $100,000 would be needed to support Mr A, and to provide for the needs of Mrs A, in the immediate future period. It may be that that amount will increase if his care needs increase.

35 The Tribunal’s calculation is in line with the estimate given by the Trustee in the memorandum prepared for the Tribunal dated 19 May 2009 (Ex 1, item 2.1, filed 21 May 2009). There it is said that the ongoing budget required for the financial needs of Mr A was $96,550. Allowing for the amount of the fund created by the sale of the Glebe property and payment of the mortgage affecting the Drummoyne property, the Trustee expressed the following opinion in relation to the utility of the net fund ($1.9m):

‘The total budgeted expenditure of $96,550 will represent just 5.1% of post acquisition investment assets. At this rate of spending [Mr A] will not experience any depletion issues. The OPC Depletion Model shows that [Mr A] could spend up to approximately $138,500 per annum, exclusive of OPC Fees and Taxation, without depleting his post acquisition investment assets within his lifetime plus 5 years (i.e. 13 years). Projections assume long term investment return of 4% and expenses to be indexed for inflation at 4%. A 13% average tax rate has also assumed (i.e. $10,000 tax expense on an investment income of $76,000).’

36 It is not immediately apparent to the Tribunal how the difference between $76,000 income and $96,550 is not seen as giving rise to some depletion from the outset. But the Tribunal accepts that any depletion would be of a marginal degree, and probably does not significantly affect the broad estimate as to the longevity of the fund given in the opinion.

37 As noted, the family contend that selling Drummoyne and buying a town house for Mrs A is a preferable course to liquidating the Glebe asset. The basic position of the family is that the Glebe property can be expected, reasonably, to generate income of the same degree, i.e. greater than $76,000 and of the order of $100,000 plus. Consequently the expected needs of Mr A can be met from that fund without any need to sell Glebe and forfeit that potential capital gain that retention of the property might result in. The family spoke at hearing of an expectation that within three or four years the market will have picked up, and it may not be unreasonable to expect a 20% or 30% gain, i.e. a return to the value that was agreed under the failed contract of 2008 ($4.8m). The family does not oppose outright the sale of Glebe, as has been signified by their non-opposition to the sale attempted in 2008, but are concerned about selling in a recessed commercial property market.

38 The extent to which Glebe requires immediate repair works is a major point of dispute between the family and the Trustee. The Trustee’s view is that the net income available from Glebe is far from enough to supply a sufficient fund to meet Mr A’s financial needs in respect of his care and other items such as providing an appropriate allowance to Mrs A.

39 Whether Glebe Can Be Expected to Generate A Sufficient Income Stream. The first report filed by the Trustee as to the state of the flats and their need for repair was unconvincing. It made sweeping statements as to what work was required and sweeping statements as to the cost of those repairs. It did not identify with any precision the nature of the alleged deficiencies, or explain what was required immediately and what could be done over time under a maintenance plan. The second report (Ex R2, 1 July 2009), from Archicentre (Brad Inwood, Architect, Petersham), addressed these concerns.

40 The Tribunal is satisfied that several flats need significant maintenance work in relation to fundamental matters such as rising damp, flooring and timber rot affecting window surrounds. One flat is seen as requiring major repairs and replacement to the bathroom area (unit 6, $20,000). The report considers that major general works are required, such as restoration of flashings, roofing repairs and the like. The estimated total of the works that ought be undertaken now is $118,000.

41 The reports supplied included external views of the building and photographs of the outbuildings and surrounding land area.

42 In the Tribunal’s opinion, it is clear that the block is in poor condition and substantial works will be required for some years to come. It is unlikely, the Tribunal considers, that if a responsible building maintenance and repair program is undertaken, that there will be a certain clear fund better than that which can be earned from a liquid sum of approximately $1.9m.

43 This consideration clearly weighs in favour of obtaining a liquid fund by selling the Glebe property.

44 The Alternative. The latest valuation obtained by the Trustee (17 June 2009) values the matrimonial home at $900,000. The Trustee is inclined to the view, based on her Office’s research as to recent comparable sales in the desired area, that a town house meeting Mrs A’s desires would cost around $600,000. The family members produced to the hearing on 1 July 2009 a valuation of the Drummoyne home of $1,050,000. They also produced researches based on recent sales across the region Strathfield-Five Dock-Croydon Park showing sales of apparently modern and good standard two bedroom town houses in the range $450,000 to $530,000.

45 It will be seen that if the Trustee’s figures are the more correct ones, then a net fund would be obtained from this strategy of about $200,000 reduced by such expenses as sale costs, purchase costs and other incidentals relating to the relocation of Mrs A. On the other hand, if the family’s figures are the more correct ones, a fund of about $400,000 would be obtained, reduced again by the expenses mentioned.

46 The Tribunal is inclined to the view that the valuation presented by the Trustee ($900,000) is closer to the mark than the valuation presented by the family ($1,050,000). The original house has been ‘modernised’ in its appearance with the result that it does not have the traditional appearance of many houses in the Drummoyne area. It has a substantial extension and several bedrooms.

47 The valuer’s report notes that the house is a Victorian freestanding house, full brick and terracotta tile, built about 1900. It has a 1970s/80s style fit out. The update is described as "Mediterranean", and the exterior has a white render. There are concrete slab extensions with a dated render. The report refers to the house retaining ‘remnants’ of the Victorian heritage such as leadlight glass windows and ornate ceilings. Because of the alterations to the original look and style, and having regard to the house not having been well maintained, the author considers that ‘the dwelling has limited market value and is due for complete renovation’. In my view, this report is more persuasive as to the marketability of the home than the alternative report submitted by the family. The alternative report does not refer to, what I see as, the significant issue of the loss of heritage features. The comparable sales analysis in the Trustee’s valuation report puts the house, I think credibly, in the range $900,000 to $950,000. The key comparator is the next door house, at No 42, which sold in March 2009 at $920,000. It occupies a similar size block, has fewer rooms, and needed renovation.

48 On the other hand the Tribunal is inclined to the view that the cost of a suitable two bedroom home unit in the area of Croydon/Five Dock is likely to fall closer to the figures produced by the family. The Trustee used as its index case a three bedroom townhouse sale at Croydon ($610,000). It seems to me that a figure closer to $500,000 is likely to be sufficient.

49 If these two views are correct then my estimate is that a fund of about $200,000 to $250,000 would be realised. This fund would be barely enough to cover two years before it would be exhausted.

Likely Wishes of Mr A

50 What the wishes of Mr A would be likely to be in relation to these issues can not be ascertained. The family is of the view that he would be most reluctant to see Glebe sold in the present market. Glebe, as I understand the submissions, carries a special importance for the family, with Mr A and Mr G having owned it for 40 years. This fact, alone, tends to suggest that Mr A has never wanted lightly to part with it. On the other hand, one of the attractions of the present offer is that the asset would pass to his long time partner in the enterprise. This option also avoids the tensions, disputes and costs that might occur if the forced sale option (partition application) was to be reactivated.

Best Interests

51 In my view, the best interests of Mr A are served by creating a substantial fund in the way proposed by the Trustee. It is clear that a fund of approximately $2m would, on best projections, mean that Mr A’s needs could be financed for at least 8 years and possibly up to 13 years. The Trustee opinion referred to earlier takes no account of the possible subsequent sale of Drummoyne. If that occurs, as is desired by Mrs A, then that would, the Tribunal estimates, add another $250,000 to the fund. At this point, the fund is likely to be self sustaining. The result would be that a fund of $2m would be preserved intact. In my view, this is a good outcome in the circumstances.
52 I am also mindful in reaching this conclusion that there is a degree of antipathy in the family towards the way the Trustee has dealt with the estate. The family are critical of the amount of the management fees charged by the Trustee, and the Trustee’s approach to the work required to maintain the flats. In my view, if the Trustee is left with a relatively small fund (the fund created by the sale of Drummoyne) and with the ongoing management of the Glebe property, tensions may well persist.